CHAPTER XVI.

PROVIDING THE "SINEWS OF WAR."

BY

HON. NELSON DINGLEY, Chairman Committee on Ways and Means.

T has been justly remarked by an intelligent financial writer that "the same energy and adaptation of means to ends which marked the exploits of the army on the land and the navy on the sea, also marked the financial administration of the war with Spain."

Up to the time of the destruction of the U. S. Battleship Maine in the harbor of Havana, on the 15th of February, 1898, the administration and the country believed that the war with Spain would be averted through peaceable pressure brought to bear on the Spanish ministry: and consequently no preparations for an armed conflict were entered upon. While the hope of a peaceful solution continued to be entertained, pending the inquiry into the blowing up of the Maine, yet the administration in the meantime quietly took measures to contract for needed ammunition and supplies —of which there were almost none on hand,-relying on the assurances of leading members of Congress that appropriations would be forthcoming when required.

The excitement so increased in this country, in consequence of rumors that the naval board of inquiry would probably find that the Maine was destroyed by external agencies, that, on the 7th of March, the President summoned to the White House the chairmen of the Finance Committee and Committee on Appropriations of the Senate, and the chairmen of the Committee on Ways and Means and Committee on Ap propriations of the House, with several other leading members of both houses, to confer with him on the critical condition of affairs.

The conference resulted in a decision to appropriate immediately fifty millions of dollars" for national defence." Chairman Cannon of the Committee on Appropriations, on the same day, introduced in the House a joint resolution to this effect, which practically unanimously passed the House on March 8, and also the Senate on the next day. The object in making this appropriation, which it was proposed to draw from the cash balance in the Treasury, was to put the country measurably in a position to enter into an armed conflict, in case one could not be avoided. For this preparation, time was indispensable.

With great difficulty the armed conflict was averted for six weeks, and during this time every effort was put forth partially to prepare the country for war, so far as coast defences and military and naval supplies were concerned. Before these preparations could be adequately made, the report of the Naval Board of Inquiry on the destruction of the Maine, the detailed statements of visiting Senators and Representatives as to the fearful condition of the reconcentrados in Cuba, and the apparent indifference of Spain to the situation, so stirred public sentiment in this country that Congress on April 19 passed a joint resolution, approved by the President on the succeeding day, directing armed intervention, if necessary, to end the unbearable situation in the Island of Cuba, and secure the independence of the people of that country.

The President on the same day, April 20, presented this ultimatum to Spain, and the Spanish Minister accepted it as a declaration of war, and immediately demanded and was given his passports, notwithstanding the President had allowed Spain till April 23 to reply. April 25 the two houses of Congress passed a joint resolution formally declaring war against Spain.

For ten days previous to this culmination, the majority members of the House Ways and Means Committee, after conference with the President and Secretary of the Treasury, had been giving their attention to the preparation of a bill "to provide ways and means to meet war expenditures." This bill was introduced in the House by Chairman Dingley on the 23d of April-the day of the expiration of the ultima

tum to Spain-and referred to the Ways and Means Committee. The Committee on Ways and Means, after considering the bill April 25 and 26, ordered it reported; and on the latter day Chairman Dingley reported it to the House.

The bill was based on the estimates of the officials of the war and navy departments, that the war would cost about $50,000,000 per month. It was thought desirable not only as a measure of precaution, but also as a potent factor in creating the impression in Spain and Europe that this country had the ability and disposition to push the war with the utmost energy, to provide the means for carrying it on for at least one year, in case it should continue that length of time; and to impose such additional internal taxes, making use in part of the stamp taxes levied from 1864 to 1872, as would strengthen the credit of the government by providing means for paying the interest and gradually extinguishing the principal of necessary loans.

The bill, as reported, provided for additional internal taxes, estimated to yield about $90,000,000 per annum, of which $33,000,000, it was estimated, would come from doubling the tax of $1 per barrel on fermented liquors, $15,000,000 from doubling the 6 cents per pound tax on tobacco and increasing the tax on cigars and cigarettes, $5,000,000 from the imposition of a special tax on dealers in tobacco and cigars, $2,000,000 from an increase in the tax on tonnage in the foreign trade, and $38,000,000 from a documentary and proprietary stamp tax, based substantially on the stamp-tax acts enacted near the close of the War of the Rebellion.

To provide whatever additional means might be required to prosecute the war, the Secretary of the Treasury was authorized to borrow on the credit of the United States, from time to time, whatever amount should be required, not to exceed five hundred millions, and to issue therefor ten-twenty, three per cent bonds, to be offered at par as a popular loan.

An important section was added, not as a war measure but as a permanent provision to guard against any temporary deficiency of revenue in the future, authorizing the Secretary of the Treasury to issue one-year three per cent certificates of

indebtedness, not exceeding one hundred millions to be outstanding at any one time-the object being to provide means to meet any temporary insufficiency of revenue to pay current expenditures, and thus avoid either bankruptcy or the necessity of using for this purpose the greenback redemption fund, or (what is the same thing) the demand notes which have been presented and redeemed, a necessity which from 1893 to 1896 created the "endless chain" that came so near resulting in serious disaster.

The bill was taken up for consideration in the House April 27, and, by agreement, was debated in the committee of the whole for three days, and on the last day was opened to amendment.

The opposition to the bill was directed almost entirely against the section authorizing the Secretary of the Treasury to borrow whatever amounts might be required, outside of the revenue for war taxes, to meet the expenditures of the war. The opponents contended that instead of borrowing and issuing interest-bearing obligations therefor, more revenue should be raised by an income tax, and that the so-called “seigniorage" of the silver bullion of the Treasury, estimated to amount to $42,000,000, should be utilized by using that amount of silver certificates against it; and $150,000,000 additional U. S. demand notes or greenbacks should be issued, through which means, it was contended, the people could be relieved of the burden of interest-bearing obligations.

To these contentions the friends of the bill replied, that, inasmuch as the Supreme Court of the United States had decided that a Federal income tax is unconstitutional, unless imposed on the basis of population-a condition which made such a tax impracticable—the income-tax plan was a proposition to remand the government for means to carry on the war to the proceeds of a law suit already decided against us; that the silver "seigniorage" idea ignored the fact that there can be no seigniorage or profit in coinage until coinage actually takes place; and that the proposition to issue additional demand notes or greenbacks, without providing the means. for their payment, rests on the "fiat" idea of money, and has been shown by experience to be not only mischievous and